BY: CAROLE O’BRIEN
Purchase to Pay (also known as Procure to Pay) or P2P has been around for many years, yet there is still reluctancy for some businesses to invest in them. The question I would ask is, what priority do you put onto control, efficiency, accuracy, and business relationships? If the answer is high, then a P2P system may be the answer.
What is Purchase to Pay?
Purchase to pay refers to the process in which a business undertakes when they need to purchase a product. In its simplest form it is the process of selecting a product or service, providing a PO (purchase order), receiving the product, then reimburse the supplier.
A P2P system automates and controls the process through integration of systems in which an organisation decides what to purchase, from whom to purchase it and how to pay the supplier from whom the goods are purchased. In addition to e-procurement functionality, P2P systems provide invoice matching and processes for returned goods.
Why would you need a P2P system?
Many companies find it increasingly difficult to manage different suppliers and have disconnected purchasing and accounts payable systems. This can lead to lack of control of purchasing, increased cost of paying invoices, disparity in purchasing invoices to account payable causing lack of real time vision of actual spend. A deficiency in any activity throughout the procurement process will involve profit leaks, ineffective invoice process and additional work and stress. Left unmanaged will greatly affect how a company does business and the relationships it has strived to build with its customers and suppliers.
Companies that have not implemented a digitised system to automate this business process are still subject to human errors that often accompany a dependence on paper and manual processing. These companies also experience delayed payments due to disputes or oversight, and a complete lack of visibility in real-time status of invoices and cash flow.
Benefits of P2P systems
Whether a company has started to experience deficiencies or not, there are some huge benefits to implementing a proficient P2P system. It gives a company insight into employing more efficient processing, achieving better compliance, and saving money. This in turn allows reduced risk by accurate automated reconciliation of purchase orders to billing, reducing the cost per transaction, catching deficiencies in any of their procedures and therefore reducing overspend and forming stronger business-to-business relationships. In a nutshell, it integrates procurement with accounts payable, streamlining the process to ensure accuracy, create efficiencies in cost and time and increase business relationships.
In summary the reasons for implementing a Purchase to Pay system:
• Streamline procurement processes – Reduces time, increases control and vision through faster trackable requisitions that are approved faster. All steps are electronic and easily trackable. Manual processes and silos make payable and purchasing systems inefficient, which may significantly impact your bottom line.
• Reduce invoice processing costs by up to 80%– Going paperless reduces time as well as cost, freeing up employees for more strategic initiatives. Reduction in human error, duplication of work and increased control.
• Realise better management of exceptions – With most invoices processing straight through, exceptions can get the attention they deserve and get resolved faster.
• Improve supplier relationships – suppliers can know when they will receive payment and any exceptions can be resolved faster. Relationships will strengthen with increased visibility and efficiency.
• Leverage negotiating power – When suppliers have confidence in their payment status, they may be willing to offer terms that are more advantageous to buyers
• Get 100% visibility – will allow you to track real-time and historical data and thus gain greater control over your cash flow and working investment.
As with any transformation there will be costs but these can be mitigated by the benefits of cost savings, efficiencies, and overall visibility to make informed decisions for the future.
Where can Auditel help?
Transformations of processes and systems need careful consideration and time. As independent consultants we can assist you throughout the journey, from the conception of change to implementation and beyond.